Four Lost Decades: Why American Politics Is All Messed Up

Political update: the annual showdown over the federal budget and associated topics is about to begin. Over the weekend, President Obama warned that he wouldn’t negotiate with Congressional Republicans about raising the debt ceiling, which is due to be breached sometime next month. But there’s widespread speculation that the G.O.P. will play hardball and shut down the federal government.

If your eyes are already glazing over, don’t feel guilty. I get paid to track this stuff, and I, too, find it a struggle to keep up. If, as Marx said, history repeats itself, first as tragedy and then as farce, how do you describe a four-peat? In 2010, Congress failed to pass a budget. In 2011, we had a debt-ceiling crisis that resulted in the sequester and Standard & Poor’s downgrading treasuries. Last year, it was the fiscal-cliff crisis. And this year, we have a debt-ceiling crisis and a budget crisis—without a new spending resolution, the federal government will run out of money at the end of the month—with the added complication that some Republicans want to defund Obamacare. In short, it’s business as usual on the Potomac.

Why is Washington so screwed up? Some people blame the Tea Party, others blame the lobbyists; my culprit is the economy. Countries with healthy economic systems tend to have polities that function pretty well. (The United States of the postwar era is a good example.) Countries with dysfunctional economies tend to have dysfunctional political systems, in which radical groups look for someone to blame and rival interest groups fight over the spoils. And that, sadly, is where we are now.

On Monday, I wrote about the lopsided nature of the economic recovery that began in 2009. On Tuesday, the Census Bureau released its annual update on income, poverty, and health-insurance coverage, which showed that in 2012 the income of the typical American household held steady, at about fifty-one thousand dollars. The poverty rate also remained pretty much the same, at fifteen per cent. And the percentage of people who don’t have health coverage dipped a little bit, to 15.4 per cent.

Those were the headlines. But the really interesting stuff was in the body of report, which contains data on incomes going back half a century. What these numbers show, or rather confirm, is that in economic terms much of middle America has experienced four lost decades. Since its founding, the United States has been a country based on enterprise, hard work, and material progress. But for forty years now, the engine that generates across-the-board rises in living standards has been stalled, with incomes stagnating at the bottom and in the middle while growing rapidly at the top.

It’s not a new story, of course. Still, for anybody seeking to comprehend modern American politics, its importance can’t be overstated. Here are some of the Census Department’s figures:

In 1973, a typical American household—one squarely in the middle of the income distribution—earned $48,557 in inflation-adjusted dollars. In 2012, the typical household earned $51,017. Over forty years, that’s an overall gain of roughly five per cent. To put it another way, it’s a difference of about $47 a week, which equates to an annual rise of about $1.18 a week.

Men have borne the brunt of wage and income stagnation. The comparable earnings of many male workers have fallen. In 1973, a typical American man who worked full-time and year-round took home $51,670. In 2012, the median full-time, year-round male worker earned $49,398. That’s a difference of $2,272, or about $44 a week.

Within the pattern of overall stagnation, white Americans have done better than some other racial groups, but not by very much. In 1973, the median income of non-Hispanic white households was $51,338; in 2012, it was $57,009. That’s an increase of about eleven per cent over forty years.

Since the Clinton years, whites (like other racial groups) have seen their incomes fall, and quite substantially. In 1999, the typical non-Hispanic white household earned $60,849, which is $3,840 more than the typical non-Hispanic white household earned in 2012.

At the top of the income distribution, things look very different. Forty years ago, a household in the ninety-fifth percentile of the income distribution—i.e., a family with nineteen families below it for every one above it—earned $133,725. In 2012, a household at the same spot in the income distribution earned $191,156. That’s an increase of forty-three per cent.

There are various ways to put a gloss on the figures, but none of them are ultimately persuasive. Changes in family composition, such as the growth of one-parent households, explain some of what has happened, but not very much. The Census Bureau published some figures that were adjusted for different family sizes, and they, too, show prolonged income stagnation at the bottom and in the middle, particularly since 1999.

Cyclical factors also have to be considered, but they aren’t the main driving force, either. In an economy with mass unemployment and underemployment, you wouldn’t expect wages and incomes to grow much. Particularly lower down the distribution, it takes a red-hot economy, such as the one we experienced in the late nineteen-nineties, to raise incomes by much. Recently, though, the only way we’ve managed to produce such conditions is by inflating asset bubbles, which obviously aren’t sustainable. Even if we were to go on another tear in real estate or technology stocks, we’d eventually get back to where we are now.

Income stagnation can’t be wished away or inflated away: it’s a central and intractable fact of modern American life, and it provides the backdrop for almost everything that happens in Washington—the coming antics not excepted. Political polarization, posturing, and gridlock aren’t fun to watch. But in a country where a successful economic model has broken down, they are just what you’d expect to see.